Seoul: The Bank of Korea (BOK) raised the benchmark rate by 0.25 percentage point for the second straight meeting Thursday to curb mounting inflationary pressure. The BOK's Monetary Policy Board hiked the key rate to 3 percent at its regular rate-setting meeting in Seoul, marking the highest level since January 2025.

According to Yonhap News Agency, the central bank delivered its first rate hike in 3 1/2 years in July. It marked the first back-to-back rate hikes since January 2023, when the central bank raised the rate at seven consecutive meetings starting in April 2022. The central bank has expressed a strong will to maintain a hawkish stance for the time being due to rising inflationary pressures stemming from higher oil prices and renewed uncertainty in the Middle East, as well as the better-than-expected pace of economic recovery.

Recent government data showed that the country's consumer prices rose 2.8 percent in July from a year earlier, falling below the 3 percent mark for the first time in three months but still remaining well above the BOK's 2 percent target. In particular, core inflation, which excludes volatile food and energy prices, advanced 2.6 percent from a year earlier in July, the sharpest increase since the 2.8 percent growth posted in December 2023. On top of that, international crude prices remained elevated amid escalating military tensions between the United States and Iran.

On the other hand, the South Korean economy is well on track to post annual growth of 3 percent or more in 2026 for the first time in five years as Asia's fourth-largest economy already expanded 3.8 percent in the first six months. Against this backdrop, the government last month predicted the national economy to grow 3 percent in 2026. The central bank also raised its 2026 growth forecast to 3.3 percent from 2.6 percent in its economic outlook report, with a 2.9 percent outlook for 2027.